Achieving tax certainty for oil and gas projects

Abstract

In recent years, oil and gas companies have been exposed to prolonged periods of volatile oil prices, rising costs and productivity challenges, scarcity and affordability of capital, heightened regulation and accountability and the competition of emerging alternative renewable energy sources. As Australian projects weather the current global oil price and demand–supply dynamics, the future prospects of greenfield and brownfield opportunities will depend on how well proponents can achieve certainty over the geological, geophysical, socioeconomic, operational, political and fiscal aspects affecting their projects. Establishing certainty of the tax regime and how it will apply over the lifetime of a project is crucial to its after-tax economics and is therefore a central piece of the puzzle that must be solved to secure project investment sanction. This is particularly prudent in an era of increased scrutiny by communities and tax authorities globally on multinationals contributing their fair share of taxes wherever they operate. So, how is tax certainty attained from the outset, and protracted disputation mitigated, in an environment where the tax law is constantly evolving? Early engagement with the Australian Taxation Office (ATO) is critical to understanding and assuring how the tax law will be interpreted and administered. This paper discusses: (1) best practice ATO engagement avenues for entities seeking to manage the Australian tax profile of oil and gas projects; (2) how to achieve justified trust and be tax-assured; and (3) the types of ATO products best suited to addressing particularly significant tax considerations confronting oil and gas projects.